STOCKHOLM (Reuters) - Sweden’s three-month-old minority centre-left government announced a deal with the opposition on Saturday to sideline the anti-immigration Sweden Democrats, who hold the balance of power in parliament, and avert a fresh election.

Sweden’s normally stable politics were thrown into turmoil in December when Prime Minister Stefan Lofven said he planned to return to the polls after his budget was voted down by the centre-right opposition and the Sweden Democrats.

The Sweden Democrats had threatened to bring down any government that did not curb rising immigration, and to turn a snap election - which would have been the first since 1958 - into a referendum on Sweden’s liberal refugee policies.

The deal with the centre-right Alliance bloc extends right through the next parliament of 2018-22, setting aside differences with the aim of making sure that centrist parties hold a lock on power and shut out the far right.

“The agreement is a way to show that we take responsibility for making sure Sweden can be governed; that we put the country’s future first,” Social Democrat Lofven said.

Far-right parties across Europe have been gaining ground in recent years, focusing voters’ economic fears and frustration on immigration policy.

While right-wing, populist parties have found a voice in mainstream politics in Sweden’s neighbours Denmark and Norway, Stockholm’s established politicians have refused to have anything to do with the Sweden Democrats, who want to cut asylum seeker numbers by 90 percent.

Finland and Denmark hold elections next year and the populist right are expected to do well.

After Saturday’s deal between the centre-left and centre-right, the Sweden Democrats said they would call a vote of no confidence in Lofven, although this has almost no chance of succeeding.

However, spokesman Martin Kinnunen said it would now be “easier to show that we are Sweden’s only opposition party”.

SMOTHERING DEBATE?

Analysts said there was a chance that voters would see the deal between centre-left and centre-right as a way to smother debate about immigration, benefiting the Sweden Democrats.

Lofven had campaigned in September’s election on a promise to end eight years of tax and welfare cuts under the centre-right Alliance, which made Swedes richer but left many worried that standards in schools and welfare services were falling.

A fractured electorate then returned one of the weakest governments in decades.

Opinion polls indicated that a fresh vote would be unlikely to break the deadlock between two mainstream blocs of roughly equal size, with the Sweden Democrats holding an effective veto.

The party won 12.9 percent in September’s election - making it Sweden’s third biggest - on worries about the threat to welfare from the growing cost of immigration. A poll by Novus on Dec. 16 put its support at 16 percent.

The Migration Board estimates that a record 100,000 people or more will seek asylum next year in Sweden, population 9.5 million.

The deal between the Social Democrat-Green coalition and the four-party Alliance means Lofven will not be able to raise income taxes until the 2016 budget, but will be able to make other changes in April to the budget passed by the united opposition in December. The Alliance will abstain from voting against the government’s budgets from spring onwards.

But the deal also guarantees that, if neither bloc wins a majority in the next scheduled election in 2018, the Alliance will be allowed to lead the next government, even if it comes second to the Social Democrats, who will not vote against its budgets.

Immigration policy was not part of the deal, but Deputy Prime Minister Asa Romson of the Green Party said the government would abide by the principles of an existing agreement between the mainstream parties to hold the door open to refugees.